Thursday, October 7, 2010

Small Business Job Act and Unintended Consequences

office of Jacob Fugger; with his main-accounta...Image via Wikipedia
2010 is becoming the year of major tax law changes with President Obama's signing of the Small Business Jobs Bill into law.   I do not know how the average small business is suppose to know what to expect with regards to taxation when the tax law frequently changes.  The challenge is that most small businesses will have to consult with a tax accountant to understand all the changes and the impact to their cash flow.

Thus, the rub.  Most small businesses do not have the budget for a full-time accountant and many are struggling just to keep their doors open. What lawmakers fail to realize is that when they make tax law changes, small businesses inevitably incur more costs because they will have to hire someone to explain how those changes impact the business. Those costs reduce the funds available to expand the business.

While the changes may be based on good intentions, the fact of the matter is that businesses thrive on predictability so they can do planning.  Changing laws constantly does not necessarily help small businesses.  It often leads to uncertainty and uncertainty leads to caution which means that nothing major will happen.  Along with many of the Bush Administration tax cuts likely to expire, and lack of understanding the consequences of implementing health care reform, uncertainty seems inevitable.This hurts investment and hiring and make it more challenging to get our economy on track.
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